Having your cake
There are still too many voters who believe that high oil prices will return and that tax revenues are the same as Brent Crude Spot Price. Ironically many of those that do would baulk at the idea of creating the sort of international crisis that will drive oil prices up, or for that matter paying more “at the pump”.
Whilst ever the US have large stocks of oil the prices will stay low and maybe go even lower. When higher costs and increased tax allowances are factored in any reliance by the Scottish Government on UKCS revenues is illusionary.
We will hear what Osborne is proposing on tax allowances tomorrow. I only hope he ignores Gordon Brown’s ideas on shared ownership which would result in the Treasury taking a much larger share of the burgeoning decommissioning costs. One Labour MSP tells me that he has heard the same insider estimates that I have. They could be at least £50bn in the next thirty years. Putting a figure on the Royal Academy of Engineer’s prediction that they will “be above £30bn”.
I like the “new style” GERS which under section 3 shows the reducing influence of the “Geographical Share” method of allocating North Sea revenues. I do not believe in that the geographical share is apt for anything other than assessing what an iScotland could (at best) expect. I think the UK parties should stop referring to it and base their announcements on the population share.
Barnett is supposedly based on hypothetical population shares. I have put together the following table to illustrate the current comparisons
|%||Barnett share||Tax share*||Population share|
*I have referred to HMRC Disaggregation of HMRC Tax – October 2014 which gives the same value for Scotland’s population share. The ONS predicts a 0.6% annual growth rate in England’s population over the next twenty years, double that for Scotland and Wales.
The thorny issue for the devolved governments is that they have no powers over the Treasury’s budget or later expenditure adjustments. Consequently I don’t imagine that the SNP will be prepared to increase Wales’ allocation at the expense of Scotland’s – more likely they will want increases to both at the expense of England. The only way this can be done is by the SNP “tail” wagging the Labour “dog”. If Miliband and Balls don’t put an end to this right now – whatever it may mean at the ballot box – I think Frank Field may be right, it has the potential to factually split the Labour Party into English and Scottish Parties.
The SNP have no interest in “deficit reduction” other than to reduce the Treasury’s measures to cut it – austerity – which reflect in the sum allocated through Barnett. FFA is only a means of muddying the waters. That’s why I think Ed Balls needs to make it clear that under a Labour led Westminster Government any further tax autonomy will result in increased Treasury oversight on Scotland’s spending and that true FFA is in principle de facto the same as Currency Union.
The whole question of a replacement for Barnett is a very complex one which I am looking forward to thinking about in the next 12 months. At this point I am minded that the aims of the SNP are to get a bigger share of a bigger cake which they have either baked or have a substantive interest in baking.
But maybe the outcome of the General Election will not favour the SNP’s plans. Because they may be realised. It is possible that a coalition of parties who are not sympathetic to Scotland getting a larger share of the UK cake may give Scotland full spending and tax powers – subject to Treasury oversight. There is no international precedence which dictates that coalitions have to be only between two parties. A Tory, UKIP and Lib Dem coalition is entirely feasible.
With tax revenues barely exceeding £50bn and spending pushing £70bn there is no denying that Scotland would have at best the third largest deficit/GDP in Europe. In which case the First Minister’s vision of increasing Total Factor Productivity and at the same time reduce income inequality – plus other dubious give-aways like APD – thereby creating economic bliss would certainly be miraculous.